Department of Defense Energy and Logistics: Implications of Historic and Future Cost, Risk, and Capability Analysis
Every year the DoD spends billions satisfying its large petroleum demand. This spending is highly sensitive to uncontrollable and poorly understood market forces. Additionally, while some stakeholders may not prioritize its monetary cost and risk, energy is fundamentally coupled to other critical factors. Energy, operational capability, and logistics are heavily intertwined and dependent on uncertain security environment and technology futures. These components and their relationships are less understood. Without better characterization, future capabilities may be significantly limited by present-day acquisition decisions. One attempt to demonstrate these costs and risks to decision makers has been through a metric known as the Fully Burdened Cost of Energy (FBCE). FBCE is defined as the commodity price for fuel plus many of these hidden costs. The metric encouraged a valuable conversation and is still required by law. However, most FBCE development stopped before the lessons from that conversation were incorporated. Current implementation is easy to employ but creates little value. Properly characterizing the costs and risks of energy and putting them in a useful tradespace requires a new framework. This research aims to highlight energy’s complex role in many aspects of military operations, the critical need to incorporate it in decisions, and a novel framework to do so. It is broken into five parts. The first describes the motivation behind FBCE, the limits of current implementation, and outlines a new framework that aids decisions. Respectively, the second, third, and fourth present a historic analysis of the connections between military capabilities and energy, analyze the recent evolution of this conversation within the DoD, and pull the historic analysis into a revised framework. The final part quantifies the potential impacts of deeply uncertain futures and technological development and introduces an expanded framework that brings capability, energy, and their uncertainty into the same tradespace. The work presented is intended to inform better policies and investment decisions for military acquisitions. The discussion highlights areas within the DoD’s understanding of energy that could improve or whose development has faltered. The new metric discussed allows the DoD to better manage and plan for long-term energy-related costs and risk.